Mexico issues rules to beef up derivatives trading oversight

Reuters Staff

2 Min Read

MEXICO CITY, May 15 (Reuters) - Mexico published new rules on Thursday aimed at boosting oversight of derivatives trades and centralizing the clearing of transactions in a bid to minimize risks of a market crisis.

Mexico’s financial authorities have been working on new rules agreed to in general by the Group of 20 economic powers after risky derivatives trading helped fuel the 2007-2009 financial crisis and led to multi-billion dollar taxpayer bailouts.

The regulations published in Mexico’s Federal Register by the Finance Ministry, the banking and securities regulator and the central bank set up a framework for independent clearing houses to settle derivatives trades made on exchanges or other platforms.

“It is necessary to modify current regulation to promote more transparency and order in the derivatives market,” the ministry said.

Unlike stock trades that go through exchanges, most derivatives of Mexican financial assets are traded over the counter directly between investors and institutions.

The rules also establish standards for corporate governance, operations, auditing and security while giving clearing houses the power to register information on derivatives trades.

The opaque derivatives trades that shook U.S. banks during the financial crisis also dealt a harsh blow to Mexican companies when risky derivatives bets exploded, sparking concerns that more local firms were hiding big losses.

Further regulations on derivatives trades, including bigger capital requirements to cover potential losses, will be published by financial authorities, the ministry said. (Reporting by Michael O‘Boyle; Editing by Cynthia Osterman)